Overseas units help to protect profit at BBVA

OVERSEAS expansion helped cushion Spanish bank BBVA from the worst of the crisis in its home country as it yesterday revealed a better than expected €1.01bn net profit for the first quarter.

The smaller than expected 13 per cent decline in profit from €1.15bn a year earlier was largely thanks to its performance beyond Spain.

BBVA, Spain’s second-largest bank, earned €430m from Mexico, €370m from South America and €229m from its Eurasia division, compared to just €229m in its home market in the three months to the end of March.

The bank also revealed that it had managed to hit its core tier one capital target two months ahead of the end of June deadline imposed by the European Banking Authority (EBA). The lender said it had achieved a core capital ratio – a measure of resilience – of 10.7 per cent, higher than the EBA’s nine per cent target.

However, BBVA also said that it had had to set aside about €1.5bn in provisions against Spanish property – a key concern for investors.

The bulk of the writedown would be made in coming quarters, chief executive Angel Cano said. Despite the provision, analyst JP Morgan said BBVA was lagging rival Santander in the property clean-up, with coverage of capital against property assets at 34 per cent against Santander’s 50 per cent.

Spain’s latest banking reform, introduced in February, urged banks to put aside around €54bn of provisions for property losses. BBVA’s shares closed up 2.2 per cent.